KIEV - Ukraine's new leaders named a strongly pro-Western cabinet Wednesday as the United States offered economic aid to the crisis-hit country and warned Russia that military intervention would be a "grave mistake."

Russian President Vladimir Putin had earlier ordered snap military drills near the Ukrainian border, days after the ouster of pro-Russian president Viktor Yanukovych, as fears grew over separatism and economic default.

In the volatile Crimean peninsula, brawls broke out between demonstrators supporting the new pro-Western authorities in Kiev and those urging closer ties with Moscow.

Local health authorities said one man died of a heart attack during the mayhem in the port town of Simferopol, while several were injured in scuffles that involved pepper spray and saw several bottles hurled.

Ratcheting up the tension, Putin ordered his military to undergo snap readiness drills -- one of several announced in recent months -- across a western swathe of Russia that borders the northeast corner of Ukraine.

This drew a sharp response from US Secretary of State John Kerry, who warned that any Russian military operations in Ukraine would be a "grave mistake."

Kerry had previously urged "every country" to respect the "territorial integrity" and sovereignty of Ukraine.

"Russia said it will do that, and we think it is important Russia keeps its word," Kerry stressed.

Tens of thousands gather in Kiev's Independence square to hear the line-up of the new cabinet. PHOTO/AFP

Moscow has been venting daily outrage at the meteoric turn of events in a neighbour that Putin views as vital to his dream of building a post-Soviet alliance that could rival the EU and NATO blocs.

Diplomatic efforts to defuse tensions will continue, with the EU foreign policy supremo Catherine Ashton announcing she would hold talks with Russian Foreign Minister Sergei Lavrov on March 6 in Rome after she goes to Kiev on Monday.

And Kerry stressed the Ukraine crisis should not be seen in a Cold War context. "I want to underscore to everybody that this is not 'Rocky 4'. It is not a zero-sum game," Kerry said.

$1bn loan guarantee

As fears mounted that Ukraine is on the verge of default, Kerry also said Washington was "formulating initially a $1 billion loan guarantee with some other pieces" in aid.

He added the European Union was looking at loan guarantees worth some $1.5 billion.

Ukraine is suffering from Moscow's decision to freeze a massive bailout package that Putin promised to Yanukovych as his reward for rejecting closer EU ties -- a surprise November decision that sparked mass protests that led to Yanukovych's ouster at the weekend.

Concerns over what would be a catastrophic default by Ukraine -- which is seeking $35 billion in Western aid to keep functioning -- saw the local currency sink four percent to a record low against the dollar.

People stand on a truck as thousands gather in Kiev's Independence square. PHOTO/AFP

Where is Yanukovych?

The deposed Yanukovych -- wanted for "mass murder" -- is widely believed to have gone into hiding in Crimea with his two sons and a small team of heavily armed guards.

The new interim prosecutor general insisted the fugitive ex-leader was still in Ukraine while also requesting an international arrest warrant for both him and ousted interior minister Vitaliy Zakharchenko -- a hate figure among protesters for ordering the deadly use of force.

There was further confusion when Putin's spokesman was forced to say he had no information regarding a private Russian TV report claiming Yanukovych was hiding out in a government health resort near Moscow.

Opposition leader and former world boxing champion Vitali Klitschko told German mass circulation daily Bild: "I can only warn the Russian president against taking Yanukovych in and offering protection to a bloody dictator."

Crimea unrest

As the hunt for Yanukovych continued, fears grew that the country could be split apart as tensions boiled over outside the regional parliament in Simferopol.

Pro-Kremlin demonstrators squared off against a force spearheaded by Muslim Tatars supporting the new authorities in Kiev.

As the stand-off grew more heated, the two sets of demonstrators sprayed each other with pepper spray and used batons as police struggled to keep them apart during the brief fighting.

A Maidan protester looks on near the Ukrainian parliament. PHOTO/AFP

Kiev's new rulers were offered some short-term relief when the Crimean parliament speaker cancelled a planned vote on the peninsula's secession.

But Wednesday's scuffles threatened to continue across the peninsula and spread to other pro-Russian regions such as Yanukovych's native industrial base of Donetsk.

Three of Ukraine's post-Soviet leaders issued a joint statement accusing Russia of "resorting to direct intervention in the political life of Crimea".
New pro-Western team

In Kiev, a crowd of some 25,000 people in Independence Square -- the heart of three months of deadly protest that ousted Yanukovych -- cheered as Arseniy Yatsenyuk was named interim prime minister.

The new cabinet is expected to win easy and quick confirmation by parliament after mass defection from Yanukovych's ruling Regions Party put the chamber firmly in the opposition's hands.

Freed Ukrainian opposition leader Yulia Tymoshenko (L) shakes hands with US Deputy Secretary of State Williams Burn prior to their talks in Kiev on Wednesday. PHOTO/AFP

Several nominations were a clear sign that the protesters were taking charge.

Journalist Tetyana Chornovil -- attacked in December after filing reports about Yanukovych's purported wealth -- was named head of a new anti-corruption committee.

Prominent opposition leader Dmytro Bulatov -- who emerged with a part of his ear missing and caked in blood after being kidnapped and tortured by what he believes were pro-Yanukovych thugs in January -- was asked to be Ukraine's ministry of sport and youth.

The vital economy ministry was offered to Kiev School of Economics President Pavlo Sheremeto.

AFP

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